Research On The Efficiency Of Chinese Water Enterprises

Water is the source of life which is absolutely necessary to maintain people’s daily life and it is the production of necessities. Water’s purification is so important that can not be replaced by any other things. As water industry in our country is one of the most important basic industries, and people’s life is closely related to maintain good water industry, we must pay high attention to it. When the water industry is maintained well, the lives of people could be provided by the basic guarantee so that the social stability and economic healthy development is maintained. In recent years, in our country, the water supply and sewage treatment enterprises had been integrated which were original scattered in different areas and managed by different organization in some cities. They had been organized to the formation of a large water group and to compete with the foreign enterprises which came in Chinese water market especially joined in the construction of Chinese water companies. It can be said that with the accelerated process of Chinese water industry, water supply market in cities will form the diversified competition in different size of cities. In the situation that the internal needs urgently governance and the external faced with a large number of foreign competitors, the common issue of water enterprises is the question of how to become bigger and stronger in order to achieve efficient use of resources. To carry out the analysis on the efficiency of Chinese water enterprises under this background is very meaningful, and it provides a very important theoretical significance and practical significance.Firstly, this paper reviews the water industry’s efficiency related literature in abroad and domestic. Secondly, the paper introduces the use of the Bootstrap-DEA method, the Tobit model and the nonparametric measurement method of scale economy and scope economy in this study. Thirdly, we introduce the status quo of Chinese water industry development, and then calculate the efficiency of Chinese water industry, at the same time, we also calculate the economies of scope and scale with the empirical method, then we use the results to analysis the factors that influence the efficiency of water companies with Tobit model. In the part of empirical research, this paper selects 13 water listed corporations in China, using the annual financial data during 2010 to 2013. The 13 sample companies including 8 integrated water enterprises which provide both water supply and drainage and 5 one single product companies which only provide water supply business or sewage treatment business. This article constructs a nonparametric Bootstrap-DEA model to calculate the technical efficiency, the pure technical efficiency, the scope of economic and scale efficiency of 8 integrated water listed companies each year. from the angle of the inputs and outputs, The results show that Chinese water industry have not reach the DEA efficient over the sample period, the larger enterprises’ efficiency values is higher than the smaller one. Most water companies are in the increasing returns to scale, and the largest three companies are in the decreasing returns to scale or constant returns to scale phase. All the integrated enterprises relative to the single product companies achieved the scope economies.Further, this paper uses the eight integrated listed companies’ Bootstrap DEA efficiency value as the explained variable, and selects series factors that may influence on the efficiency of water enterprises as explanatory variables. Then this paper uses the Tobit model to do the regression analysis. Regression result shows that to reduce the financial costs and management fees and to expand the scale of enterprises can significantly improve the efficiency of water enterprises. The results also show that the non state owned water enterprises’ efficiency significantly higher than the state-owned water companies.Finally, including empirical analysis, the paper have the conclusion that in order to improve the efficiency of water industry in our country, we should further reduce the costs, expand the scale of enterprises and improve the rate of resource allocation. At the same time, we should actively introducing non state-run funds into the market, meanwhile reducing the threshold to encourage the ownership of water enterprises entering into this industry and improving the mechanism of competition in the premise of perfect regulation system. In order to realize the scope economy, we should actively promote the small and medium enterprise in small cities to carry out the integration of supply and drainage. In order to enhance the efficiency of scale and achieve the scale economy, we should further encourage small and medium sized water service enterprises to merger and recombine. Based on this conclusion, this paper argues that first in order to promote the healthy development of water industry, the future reform of water industry market should encourage the enterprises to integrate in water supply and drainage business, at the same time, the government should establish the new integrated management which used to be managed by different departments. Second, we should promote the system reform of urban water investment and financing system. Third, we must open the water market to break the monopoly and accelerate the marketization process of water industry. And the last proposal is to improve the laws and regulations of the water industry to create opportunities for potential entry of enterprises to enter.